More than a million small and medium-sized business are being crippled by late payments. They’re collectively owed £30.4bn, research from Bacs Payments Schemes Ltd has revealed.
That’s a staggering increase of £11bn in two years, thanks to customers who postpone payment for as long as possible. The number of small and medium-sized firms experiencing delays has shot up by 65% in the last year.
Bacs’s managing director Michael Chambers said: “Many more companies [are] finding themselves with overdue invoices accounting for large amounts of cash which isn’t flowing into the business as it should be.
“While many businesses which owe money to others do undoubtedly have problems in paying bills quickly, there is a question mark over those who may be ‘playing’ the system and delaying payment for as long as they can.”
It causes a vicious cycle. 30% of the businesses surveyed cited cashflow as the most common reason for paying late. More than half said they pay invoices late if they don’t get money owed to them in on time. A third questioned said they’re dealing with invoices slower than they did last year.
You need to chase payments early for the best chance of avoiding problems. Start with a polite call a couple of days after the invoice has been sent out, under the pretext of checking the customer received it. Remind them your payment period is no more than 30 days (any longer than that is high-risk). Continue to gently remind them throughout this period, and don’t let it slide on indefinitely. Late payment and ailing cashflow is one of the most prevalent causes for a business to fail.
Watch the video above for more detailed information on how to deal with late payments. Bacs suggests also visting www.paymedirect.co.uk for guidance and advice on avoiding payment problems.